China is accelerating its digital currency ambitions through a dual-track strategy, combining a state-backed central bank digital currency (e-CNY) with a new framework for regulated, yuan-backed stablecoins. This move marks a significant shift in its approach to digital assets and aims to boost the international use of the Chinese yuan.
Context and Impact of Stablecoins in China
This new strategy pairs the retail and cross-border e-CNY with regulated stablecoins issued by private entities, both within mainland China and offshore. The goal is to leverage both public infrastructure and private innovation to extend the reach of the Chinese currency (RMB) in global trade and finance.
Hong Kong serves as the primary test zone for this initiative. A comprehensive licensing regime for fiat-referenced stablecoin issuers officially took effect on August 1, 2025. The Hong Kong Monetary Authority (HKMA) is now overseeing the application process, with indications that only a handful of licenses will be granted initially. This new regulatory framework includes strict requirements, such as the mandate for issuers to maintain full backing with high-quality liquid assets and to grant holders the right to redeem their stablecoins at par value. The regime has already drawn significant institutional interest, with major banks and technology groups like JD.com and Ant Group reportedly seeking licenses or announcing issuance plans.
Beyond Hong Kong, China is exploring the use of blockchain technology for cross-border trade. The recent launch of AxCNH, the world’s first regulated offshore yuan-linked stablecoin, in Kazakhstan underscores this push and is seen as part of China’s efforts to build blockchain infrastructure for its Belt and Road Initiative. Domestically, the Shanghai Digital Yuan International Operation Center is conducting trials, while the multi-central bank digital currency (mCBDC) Bridge project, which includes China, aims to reduce the cost and complexity of international trade.
Implications
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Adoption and Liquidity: The introduction of licensed yuan stablecoins in Hong Kong and the expansion of e-CNY pilots are set to increase the supply of digital yuan for trade and create new offshore cash pools. This could significantly smooth and accelerate cross-border settlements in RMB.
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Risk and Control: The system operates under tight state oversight. The HKMA’s regime enforces robust KYC/AML rules, and Beijing maintains a strong preference for approved projects. This approach reduces the decentralized nature of the ecosystem and increases compliance obligations for issuers and trading platforms.
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Monetary Geopolitics: The parallel development of the e-CNY and yuan-backed stablecoins is a clear effort to promote the international use of the RMB. This initiative aims to shift capital routes and reinforce state influence over future digital payment infrastructures.
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Payment Rivalry: The success of the e-CNY in the domestic retail market is not yet assured. Its uptake largely depends on whether it can outperform the immense convenience and entrenched ecosystems of existing digital wallets like Alipay and WeChat Pay.
The next significant signals to watch will be the HKMA’s first grant of stablecoin licenses, expected in early 2026, and the results of ongoing cross-border e-CNY tests. The actions of regulators and the performance of these early projects will reveal whether this ambitious drive will successfully widen the yuan’s use overseas or primarily create a more controlled, state-influenced digital currency zone.
